Changing the Unchangeable Trust.
The commonly known rule is that irrevocable trusts cannot be revoked or amended. A trust is irrevocable, which means it cannot be changed, when its maker has died. There are certain principles that do allow interested parties to modify or terminate an irrevocable trust. The case law limits these instances to situations where the change would not violate a "material purpose" of the trust. A change is also possible if connected to the settlement of a bona fide dispute. A "living" trust or "revocable" trust means the maker of the trust can change the trust so long as the maker is alive and competent.
In Wyoming, the Uniform Trust Code provides that changes that are not contrary to the stated purpose or intent of the trust may adopted so long as the settlor and all of the qualified beneficiaries agree. Changes to a trust are permitted in Wyoming within certain limits pursuant to a court order. Wyoming also allows retroactive changes to achieve the maker's tax objectives.
In addition to changing the trust, a trustee may be able to "decant" a trust, meaning that the trustee can "pour" the trust assets into a new trust. Trustees may want to decant in order to
- extend creditor protection
- change trust situs
- reduce state income taxation
- extend the period for vesting
- and otherwise update the trust to recent estate planning objectives
- minimizing taxes
- protecting beneficiaries from their own bad judgment
- protection from creditors.
The general requirement to "decant" or change the trust is that the trustee has the power to invade the trust's principal. The legal theory is that a trustee with discretion to do so can use the power to create an estate in trust that is less than the estate set forth in the initial governing instrument, so long as that instrument does not indicate a contrary intent.
Changing a Will After Death
Wyoming law permits the changing of a will after death if the parties are willing to enter into a post-mortem "family settlement agreement" which creates an enforceable agreement that replaces the provisions of the will. The reason for the rule is so that the family does not have to go through probate but rather can make a settlement agreement. The change of will provisions can be done so long as the change does not defeat a bequest to a nonparty to the agreement or impair rights of creditors.
Caution should be observed if such a settlement agreement involves rights of minors because the virtual representation provisions regarding a minor contained in the Wyoming Trust Code do not extend to the testamentary provisions of a will. Similarly, caution should be given to agreements involving the disposition of real estate if there has been a passage of time based on a verbal understanding that might extend beyond the period permitted by the statute of frauds.
The takeaway: The tax, asset protection and other benefits available for updating or changing your trust or a will are found on this website. I would be please to speak with you about your estate plan and offer a free telephone consultation (307.200.1914) or videoconference.